Rockwell Automation, Inc. (ROK) Earnings Call Transcript & Summary

Welcome to Automation Fair 2023. Please give a round of applause for your Investor Day host and Rockwell Automation Vice President of Investor Relations and Market Strategy, Aijana Zellner.

Hello, everyone. Welcome to Rock Automation's Annual Investor Day. We started the day with our energy transition panel, where you heard from industry leaders who are reshaping the energy landscape and working to meet global climate targets. And there's so much more to come. Rockwell is creating the future of industrial operations. And we're excited to share with you what we do, why we win and how we accelerate. With that, let me welcome our Chairman and CEO, Blake Moret, to the stage. Blake?

Hi, again. I'm really looking forward to the next couple of hours with you as we talk about where we've been, where we're going. We're going to get into the details of our recent past, some of the things that create such a bright future, both in terms of the needs of the market as well as our ability to serve. To start with this, at a glance slide is something that we've used a lot over the last couple of years. I just want to make a couple of points that I think are particularly important from this. First of all, we've broadened our vertical industry exposure significantly over the last few years. So looking at 25% of our exposure in discrete, 40% in hybrid and fully 35% in process represents a nice balance across the various end markets. And one of the most important things about this is we have great market access to all of these areas today. So that's not aspirational. We're very happy with the market access we have in each of these industry segments as well as the verticals within each of these. If we go back to November of 2019, when we launched our framework for accelerating profitable growth, think about the things that Rockwell was grappling with at the time. Now this was November 2019. So the impact of COVID, it's -- the full understanding of the world on the impact of COVID was still a couple of months away. But it was clear that Rockwell needed to look at growing faster to accelerating the growth of our core. We had grown as a multiple of industrial production, about 1.8x IP in our served markets over the previous 20 or 30 years. And that's what we were most highly correlated to. And so we knew that through a combination of new disruptive technologies like independent card, a more assertive posture in Europe and Asia, continued development of our capabilities and process, things like that. We needed to move faster. And so we talked about growing at a 10% faster clip than that 1.8x multiple, and going to 2x IP just in our core. We also recognized that we needed to strengthen and move faster with our software offering with our high-value services. And so we put that in a bucket we call Information Solutions and Connected Services. And we said that we were going to grow double digit in that area. And at the time, it was only $200 million or $300 million. But we said that compounding was going to be meaningful for us. And more importantly, it was going to be something that met some key customer demands to find a landing spot, if you will, for all that data that was being created in our real-time control processes. And then we said we were going to use our balance sheet. We're going to make more acquisitions, but we were going to do it in a disciplined way. We were going to do it in certain strategic themes, and we were going to make sure that we were open about what kind of returns that we expected from those acquisitions. So a few months later, we started to understand how big an impact COVID was going to have. The world made it through that. We had supply chain shortages right on the heels of it. So there were a few things that we weren't really planning for when we launched this framework. But I'm very happy to say that with the completion of fiscal year '23, we accomplished those goals. We got to $9 billion, and there's nothing magic about $9 billion, but doing it profitably and at a faster pace than we had done in the past, that was important. There's also the way we got there was not just hitting those top line headlines, let's say. But in each of the components of this, so we grew at a faster clip in our core. We continue to grow double digits in Information Solutions and Connected Services, and along the way, increased our annual recurring revenue. And I'm very happy with the strategic fit of the acquisitions that we made. And very importantly, looking at the profitability that we expected, the conversion on incremental revenue, the ROIC, the returns from our acquisitions. So we've been happy with that, and we'll take one small moment of satisfaction that those goals despite the bumps that the market put and our path, have been achieved. We also saw that show up in some of the large numbers in terms of revenue, in terms of EPS doubling over the last 7 years. We've grown dividends every year, and we continue to be mindful of our commitment and our responsibility to give you attractive returns on your investment. So what next? So here are some prominent features of the next leg of our journey. First of all, what's the market going to do? When you look at the automation market, it's growing faster. And we touched on a few of the reasons this morning, workforce, workforce shortages, people needing to be given super powers with the technology. Certain vertical-specific spending, EV, semiconductor, energy transition, people tend to want to live longer, healthier lives, and so I think life sciences is going to continue to be important. Food and beverage, people want to eat. They want to have choices as they move closer to the middle class, and those packaging varieties, the different foods, that's our biggest vertical. So those things, we think, are going to spur faster growth in the market itself. We're going to continue to take share and to grow our expanded market. So when we look at share gains, we've talked before about our independent car technology when we look at what we just did with Clearpath robotics in adding the autonomous mobile robot market, fast growing. We talked about that. We'll talk about it more in a little bit, to our served market and some of the things we've done in software. We think there's the opportunity to continue to add meaningful growth year-over-year through that combination of share gains and expanding our market. Shoring, that plays into it because while that increases the overall market, we have opportunities as the clear share leader in the U.S. and North America to get an outsized benefit from that. And we'll give some thoughts on the dimension of that a little bit later on. Annual recurring revenue. So do the math, over 8% of our total revenue growing at double digits, that yields in the neighborhood of 1 point of growth a year, and we expect that to continue. We're very happy with the results of our ARR growth over the last year. We expect that to continue, good double digits going forward. And going forward, we're going to be talking more about ARR than Information Solutions and Connected Services, but we'll continue to give detail of what makes up that ARR and how it's doing. And then acquisitions. And with the successful address of some of the past priorities, the priorities that we're looking at this point are acquisitions that contribute to our annual recurring revenue, continued market expansion in Europe and in Asia. And then application specific technology for our target verticals. And so that's kind of a collective bunch, but looking at the things that we can do to add additional value for some of those target verticals, be they hardware or software services. One of the examples of where this benefits us this more expansive strategy as you think of a customer like P&G. P&G is a long time, very demanding customer, and we certainly see good business from them in terms of our traditional value closing a real-time control loop, but they're also seeing the benefits of our new value across their operations in terms of our new technologies as well as our new capabilities and high-value services. So it really is about the hardware and the software and the services and our ecosystem, all working together to simplify the complex challenges that our customers have and produce outcomes across all of those industries, discrete, hybrid and process and I should mention we already have great market access to all of those industries today. Now we're going to go deeper into what we do. Why we win against both the global competitors as well as the niche players, and how we accelerate the journey to unlocking the full potential of automation and digital transformation at our customers. And to begin with that, I'd like to introduce Cyril Perducat, our CTO; and Matheus Bulho, who runs our Production Automation business, which is the business that includes Logix and HMI as well as our networking. So please welcome them to the stage.

Good morning, everyone. So with Matheus, we are going to spend a bit of time to share our vision and our priorities around the future of production design and control. But before doing that, Blake mentioned that over the years, Rockwell has built an extensive portfolio, and software is a very important part of our portfolio, and it covers the automation system designs that we are going to speak about today, the operation management, all the softwares that is used to actually run and improve operation, and all the suite of software that are necessary for maintenance. And what we have also done over the years is to extend traditionally on-prem capabilities by cloud capabilities. So our design suite being augmented with a factory to design hub, and we are going to speak about it. And the same thing across all the rest of the software portfolio. So let's look at control and let's start to speak about control. But what we have -- sorry, mistake with the slide. So what we have shared in previous Automation Fair is the importance of the idea of a software-defined architecture, and this was also a term that was used by one of the panelist this morning. And this idea of software, software-defined architecture, which is progressive in many industries. We have seen this in the telco with software-defined networking, it's very applicable and extremely interesting in the context of the life cycle of an automation system because we are able to reduce a certain number of constraints for customers, both when the system is designed by reducing the dependency from the hardware by creating better optionality for customers to be able to modify an application independently of the underlying hardware. And also think about other perspective like security and the evolution of security threats and security needs across the life cycle of the installation, the ability to permanently being able to evolve the software in that direction. This allows not only optionality for customers, but this also creates optionality for Rockwell Automation, optionality in terms of business model, the ability to adapt our business model, adapt the way we deliver capabilities, and adapt the way we monetize those capabilities. We can now, with our software-defined approach, not just only transact a piece of software together with the hardware, but we can do this independently. We can have some features that are added as a pure piece of software later in the life cycle of the installation or we can have some specific features or capabilities that are subscribed by customers, creating annual recurring revenues for Rockwell Automation. So if we look about all those trends and all those evolution of the software-defined architecture, then I know that a lot of people are asking themselves, so what about the PLC sorry, what does the PLC becomes? PLC was invented in the '70s. It was initially invented to replace cable logic, but it has been through multiple reinvention over the years. So Matheus, tell us a little bit, is this another reinvention that we are doing of the PLC with software defined architecture? Or is it the beginning of the end of the PLC, maybe? Or what's your perspective?

Yes. No, of course. So our customers, they love our hard work. They love the resiliency. They love the robustness, the safety, integrity, the real-time control capabilities, the fact that we support it literally for multiple decades. And when most people think about a PLC, they associate with hardware. But in reality, the PLC is, first and foremost, industrial software. The PLC is the industrial software run time. It's what executes the customer application. It's where the logic is solved. It's where the motion is computed or the safety is monitored where the robot geometry is managed and much, much more. And here at Rockwell, this industrial software run time is Logix. Logix has been powering manufacturing for decades. It's running millions of production systems today. And I think the best way for you to think about Logix is it's the operating system of manufacturing. And while we're going to continue to enhance and add even more value to our hardware, we know that our customers need flexibility in how they consume this run time. And just like we've done with our own visualization offering, FactoryTalk or Optix, where you can consume the visualization on time, with our hardware, or frankly, any hardware, with Logix is no different. And here at the show floor today, you will be seeing Logix' edge is the very beginning of this journey for how we intend to continue to make Logix more deployable and consumable in many different forms.

Which at the end, creates access to new markets, new opportunities, new possibilities...

That's right.

Beyond what we traditionally do with the PLC. But as you said, the idea that we have embedded in the PLC in a certain form factor, multiple disciplines, the quality of the integration, the quality of the safety associated, I think, is something that has and will continue to have a lot of value for customers, and we will bring more flexibility to this with a software-defined approach and multiple targeted hardware. Maybe give us an idea of an application, for example, where Logix and source additional flexible options create new value for customers?

Think about the life sciences industry, where time to market is a significant business driver. Customers have an interested in having a common platform all the way from the drug discovery process, that's typically in a lab constrained environment, all the way to mass production. So with a flexible approach to how that run time is deployed, customers can seamlessly move the application from discovery to production and shorten their time to market.

So we've spoken about our control evolve with software defined, and other area that I think is a ground for a lot of innovations that we are working on is AI and how AI intercepts this control. We like to present it in the way that it's about giving superpowers to people. It's about augmenting the capabilities of the workers, of the maintenance teams, of the engineers that are in production with additional capabilities. And when I think about some of the scenarios that were discussed in the panel, for example, this morning, there are many complex optimization scenarios that need to be done. Now we have customers that not only want to be able to produce what the type of goods that they are producing, but they want to do this in a way that is also less energy-intensive, that optimize or even capture in process the carbon that is emitted. So those all different kind of optimization scenario are a very good ground for innovation around AI. So tell us a little bit more about how that applies specifically to control?

Yes. You heard from the panelists earlier today. So AI has been in use in industrial production for quite a while. And it's been adding value in the traditional dimensions of productivity, optimization. But perhaps most importantly, I think we see an opportunity for AI to expand what's possible with automation, essentially automate what's been traditionally impossible or impractical to be automated. And the way I think the easiest way to relate to this notion is think about the transformation that's happening with autonomous driving. A car has a controller that controls the driving function, just like a piece of manufacturing equipment has a controller, like our PLCs controlling the process. You know, it's impossible for the automaker to predetermine and predefine the business logic that's involved with all the different scenarios that the car is going to encounter when it's performing the driving function. The same exact pattern is in use today in manufacturing. Now here at Rockwell, we've had AI applied to a very large set of our portfolio. It's embedded in our Logix AI and how it optimizes the control of a process. It's built into Fiix and how it predicts the needs of maintenance in industrial operations. It's also built into Plex in how it plans for production schedule. And more recently, it's in our autonomous mobile robot portfolio from Clearpath robotics.

Exactly. So maybe give us an example of application with AI?

Yes, sure. So if you think about high-speed production lines. Take, for example, high-speed packaging, which just by the virtue of having the product move fairly rapidly through the line. It's very difficult for you to engineer a solution that inspect all aspects that are required for -- to ensure production quality. So what we often see is people literally stopping production lines to collect manual samples of what's being produced and verified that it meets production standards. And with the advancements in sensing technology and machine learning, we have the opportunity to automate that process and reduce significant costs involved with costly downtime.

Yes. And this is where the parallel with autonomous driving is very accurate. When you drive a car, fundamentally, you have 3 parameters. You have the wheel, the brake and the accelerator and nothing else. You drive the car with all this. In new production process, that's exactly is the same thing. When we have identified what are the key variables that impact the process, then we can train a model to be able to optimize continuously those parameters, so not optimize onetime based on the large sample of data, but permanently train, and retrain the model that run with a controller or in the context of our controller or at the edge so that production can be permanently optimized based on also the input of operators. And that does best production looks like in the case that you mentioned. So thank you. And to continue, we've spoken a lot about AI in operations and in the production environment. But I would like to invite on stage Judson Althoff from partner, Microsoft, to talk a little bit about what we are doing at a design stage, and how we are using generative AI capabilities from our partner, Microsoft, to build a very innovative and different type of engineering environment.

Hi, Cyril. How are you?

Very well. So welcome. Thanks for taking the time to be with us. So we have been working over the past months with Microsoft on the continuity of our collaboration. So I was mentioning in the introduction a little bit earlier, FactoryTalk Design Studio, which is our cloud-native engineering environment, and this has been the result of multiple years of collaboration with Microsoft using your cloud technology. And now we are working on the next level, which is how do we create an engineering environment that will give those super power to developers and Microsoft have spoken a lot recently about the copilot approach. So can you tell us a little bit more about what is the approach of Microsoft and copilot? And then we will move to speak about how we apply this, in terms of the context of Rockwell.

Thanks for giving me a few minutes to chat with you all today. Look, maybe what I'll do is set quick context in terms of what Microsoft is doing and then how it parlays into our partnership. So at Microsoft, we're working pretty hard to infuse generative AI into all facets of our cloud services and across the board from how people look at productivity scenarios to how people looking at running business operations and customer engagement scenarios, through to how people look at innovation. And we've chosen this copilot metaphor because we believe that there's just a tremendous amount of low-hanging fruit around empowering people to be more productive in the work they do, enriching the work they do through the use of generative AI, and actually keeping the human in the loop so that the model teaches the people and the people teach the model recursively. That's most notable in our Microsoft 365 copilot products, where people can use copilots to create a first draft of a presentation or create a summary of a document or work in a team scenario to summarize a meeting, handout action items, through to how people actually create assets. And one of the most common uses of copilots today is in our developer tools, in GitHub copilot. In fact, GitHub copilot's responsible for developing 30% of the code in our other copilots. So huge gains in productivity that we're seeing. The second thing we're doing is opening up that copilot ecosystem to our strategic partners, like Rockwell, and we're really pleased to see that you all have taken that innovation as fast as you have, and implemented in factory talk design studio, which I'll talk more about in a moment. And then the third thing we're doing is co-innovating with our strategic customers, like Procter & Gamble, for example. Like Blake had mentioned, where we're on-site at the face of the client, digitizing their factory environment and enabling AI to drive real productivity gains and efficiency gains in the overall processes there. So the way you can think about these copilots is they chiefly do 3 things. And the FactoryTalk Design Studio copilot is aimed at all 3 of these things simultaneously. The first thing is they democratize the experience. In other words, if you think about getting more people engaged in innovation and getting more people engaged in automation, one of the biggest barriers is the learning curve, the time to getting people up to speed, engaging frontline workers. So by having a copilot in the loop, you can democratize what it means to actually understand all of the syntax to program these layers. Rather than getting into the weeds of the syntax itself, you simply use a prompt and natural language to say, "Hey, this is what I'm trying to do, please build me this." And the copilots is off and running and getting this syntax you need to drive the automation. The second thing then is the obvious productivity gains that come from that. And frankly, the job skilling benefits that come from it as well. If you think about it, we -- like we see these copilot skills being added to resumes and people saying, "Hey, listen, I know how to work productively in a copilot environment. I have that skill as being a marketable skill." And then the reverse actually happening, companies that have these assets being more attractive for people to come in because let's face it, who wants to write a first draft ever again, who wants to have to worry about summarizing the work. And then the FactoryTalk Design Studio contract, who wants to worry about going off and learning esoteric syntax, when you can simply ask the copilot do it for you. And the third area, which is perhaps the most powerful is this notion of inclusive collaboration. So you can invite the copilot. In fact, when you talk to design studio to a meeting. And we could -- the 3 of us have a design review on a project and actually interact with the copilot and get feedback, frankly, from each of our bodies of work from the copilot. So it's less about me maybe accusing Matheus' project that may be not being on track, or him doing the same for me, and more of us coming together on projects. And so just from an investor standpoint, we see that as a huge competitive differentiator for Rockwell because if you can democratize the experience, get more people using the capability faster, drive productivity gains and then drive a more inclusive engagement, there's more users working across the system, the whole business moves forward. So a tremendous amount of deep partnership over the last couple of quarters to get this capability to market at the speed and pace that we have. And I really think it's game changing for Rockwell.

Well, that's great. I think certainly, the 3 of us would be much better than me by myself on the -- maybe if you could talk a little bit about how do you see solutions, such as the FactoryTalk Design Studio, cloud native solutions, disproportionately benefiting from this type of capability?

Yes. And it's interesting because you can see, even you talked about AI being infused into Fiix and Plex and it's no coincidence that AI infused into cloud native capabilities, it's a faster time to market and quicker yield in terms of value realization. And the reason behind that is, look, I'm bullish on all of the capabilities that AI will bring to market, but there's one rule that it won't change, and that is that no system can be any more intelligent than the data over which it reasons. And you can invest as much as you want in your AI, but if it's reasoning over bad data, all you're going to do is make mistakes with greater confidence than ever before. And so for me, this notion of getting the data aggregated in a useful way in the cloud so that you can reason over it holistically, it gives cloud native applications, a huge advantage in the market. And it's another area, quite frankly, where, look, at Microsoft, we see a lot of innovation happening across the industry. We have to applaud Rockwell for being so fast in getting the cloud native, infusing AI, getting it into real-world pragmatic scenarios of innovation where people can get value out of it. So huge, huge leap forward in our view.

Thank you, Judson. And what you are seeing on the screen behind us is the actual product, FactoryTalk Design Studio with generative AI, where we are able to use generative AI both to produce automatically code based on the prompt, but also to have code reviews and have questions, answers based on some criteria. And on this idea of empowering people that you mentioned, it's giving the best practice of the best developers to every other developers that work, there is a sense of amplifying collaboration and amplifying the community that is very important for Rockwell. And we believe that adding this technology to our development environment will continue to make a significant difference in the market and continue to...

Super. Well, thanks for the partnership, and thanks for having me. Appreciate it. Thank you.

Now, I would like to welcome on stage Tessa Myers to speak about products and logistics. Thank you.

Good morning, everyone. It's great to be here with you. And great conversation earlier. So I'm going to switch gears for us, and I'm going to talk with you about production logistics. And I think it's important first to set the backdrop of what's happening in the market in manufacturing, and why we think now is the time for autonomous production logistics. All around the world, labor shortages, along with an aging population, will continue to constrain the world's workforce over the next decade. And major shortages are expected in the manufacturing sector. The National Association of Manufacturers in the U.S. estimate that more than 2 million manufacturing jobs could go unfilled between now and 2030. And at the same time, companies need to be able to respond to rapidly changing customer preferences for products, different products, different packaging types and sizes, along with an increased need for output. Today, most materials in a manufacturing plant are delivered to a production line and finished goods that are moved away are a highly manual process. It's very people intensive. So there is a massive productivity opportunity to reimagine how product moves through a manufacturing plant, what we call production logistics to handle the ever-increasing variety of products in those plants and do so with the least amount of labor required. The accelerated adoption of autonomous material handling is inevitable to overcome the long-term labor shortage challenges that companies face in delivering greater efficiency, agility and safety, and allowing very hard to find workers to focus on more impactful and more meaningful work. This is an area where our customers are seeking solutions today. A large global discrete manufacturer will increase its advanced automation budgets, nearly 100% in 2024, with autonomous production logistics as the key investment theme that they're focused on. And another large global hybrid manufacturer plans to automate material movement workflows throughout their global plant network, saving them hundreds of millions of dollars annually, and redeploying that scarce and valuable workforce to operate and maintain their production lines. So you've all seen the announcement of our acquisition of Clearpath Robotics and their auto motors division. And the inclusion of autonomous mobile robots gives Rockwell a complete portfolio of material movement smart devices, with our Logix control, our drives and several portfolios, our intelligent conveyors with our independent cart technology. The work that we've done to integrate robotics into Logix and the partnerships that we've built with robot companies really bring together an end-to-end solution for control of autonomous production logistics and material movement through a plant. And one of the biggest barriers to the adoption of autonomous mobile robots in a plant is the integration to the control system, and that's what we do really well. We acquired Clearpath and its automotors division because of the differentiated intellectual property of fleet management and navigation software, the breadth of the AMR portfolio that they offer today in the significant domain expertise that they've built in robotics, autonomous control and material handling. Today, auto robots are used around the world to safely, efficiently and autonomously deliver the right part, to the right place at the right time every time. The value proposition for autonomous mobile robots alone is compelling. The opportunity to overcome labor challenges to significantly reduce cost. But when combined with our production design, software offerings, our operations management and manufacturing execution and our asset management and maintenance software-as-a-service suite of solutions, Rockwell is poised to offer a game-changing unified solution for manufacturing, enabling the end-to-end orchestration, execution and optimization of manufacturing operations. We can help empower manufacturers to orchestrate the end-to-end operations from production planning to scheduling, execution of that schedule on the manufacturing floor, the equipment and fleet management and maintenance and enhance their insights and their decision-making with embedded AI-assisted insights. We can leverage a full digital twin capability to help companies emulate and simulate the production environment, and the flow of materials through their processes to speed up their time to market for new product introduction and optimize their production routing. All of this built on a single-control architecture, Logix, which helps to ease the time and minimize the risk of integrating plant for systems and ultimately reducing cost to maintain and operate their production. All of this is enhanced by our logistics and supply chain life cycle services that we have through our Kalypso team to really help customers in the consultation, the advice, the design and implementation of these production logistics systems and the ability to help them maintain them. Customers are seeing real tangible results from the use of this technology. One example, a consumer packaged goods company has increased their throughput 600% by enabling operational efficiency and alleviating labor shortages. A large automotive end-user, brand owner, has selected automotors to scale across their global operations to help them mitigate and overcome labor shortages and drive substantial productivity and cost efficiency in their plants. So hopefully, we see this as a significant opportunity that we're very excited about. So now I'm going to introduce to the stage Brian Shepherd, Senior Vice President of Software and Control to talk to you about how we're driving, bringing all of that data from the plant floor, from autonomous mobile robots and bringing that into the edge and into the cloud with our solutions. Brian?

Thank you, Tessa. Smart factories like those that Tessa was talking about are full of automation systems, smart devices and applications that are creating oceans of data. Much of that data is born in Rockwell devices and applications. And customers intuitively know that there is value to be had by exploiting that data more fully. Rockwell over the last few years has been executing a comprehensive strategy to transform, aggregate and leverage contextualized data. Our goal is to create value for our customers from that data at scale. Not just in individual pilot projects, but really across their entire set of operations. Let's take a look at each level in the stack above the devices. Last year, at Automation Fair, we introduced FactoryTalk Optix, our next-generation edge platform. The first and best example of an edge application built on FactoryTalk Optix is our HMI, our visualization capabilities that allow our customers to create applications for monitoring and adjusting machines and production processes. We've had great early success with FactoryTalk Optix. Michelin has selected Optix as their next-generation standard for supervision and visualization. But that's really just the start. Optix provides the ability to write and run applications perfectly suited for the edge, ingesting large volumes of data from any maker, not just from Rockwell devices, to transform that data and make it locally and immediately actionable. When split seconds matter in production control, all of those decisions have to be made at the edge. Logix AI is a good example of that, providing an auto ML application, providing closed-loop control optimization at the edge. The ability of FactoryTalk Optix to consolidate and concentrate that large volume of OT data at the edge makes it a perfect gateway to the cloud. Let's take a look at the next level up. Trusted and comprehensive and actionable data is critical to achieving value at scale. Many AI projects fail to advance beyond that pilot phase because they depend on the expertise of hard-to-find and expensive experts. We're addressing that need for a trusted industrial data hub with our FactoryTalk Data Mosaics offering. Data Mosaic aggregates production data of all types, OT data, for sure, but also IT application data, engineering, design data like process and instrumentation diagrams, assembling all of this fragmented data, contextualizing that data into a coherent and single source of truth for the production system Data Mosaic can be used as a next-generation historian, really providing a flight data recorder experience for what's been happening on the factory floor. But the data in data mosaics can be used for so much more. We're building industrial apps on top of Data Mosaics, FactoryTalk Energy Manager aggregates and contextualizes energy data for many sources. It's a critical need for our customers today to roll up their energy utilization to simply monitor, analyze and compare our energy usage, the cost of that energy, the emissions and carbon footprint of that energy usage across their production operations. But importantly, it's not just a roll-up of energy meter data across the factory. That energy data is contextualized to the product being made, kind of the watts per widget. And that's critical information as customers try to optimize their usage of energy and their reporting of energy usage in manufacturing. We've implemented FactoryTalk Energy Manager as part of our own sustainability efforts at Rockwell. We implemented this solution in our Twinsburg manufacturing facility, with just a few hours of configuration work, highlighting the very fast time to value that's inherent in pure SaaS solutions. Next quarter, we'll deliver FactoryTalk batch analytics, a solution for hybrid industries. Think about food and beverage companies that are using batch production processes. This solution gathers data from all sensors, all OT, all manufacturing execution system information, all quality management applications, bringing that all together into a single view of the quality, the performance of that batch. And you get advanced analytics, describing the quality of that batch, the efficiency of creating that batch and comparing those factors against your golden standard for that batch. It provides immediately actionable information for the operators of the facility to fine-tune the production process. We see a long runway of industrial applications being built on top of Data Mosaics.We will build some, but also our partners and our customers will build them, too. And so later in '24, we'll release an app building environment on top of Data Mosaics, making access to that trusted source of data very straightforward and easy. As customers use more and more data, and more and more applications in Data Mosaics, they move to higher-level tiers of our offering, and that provides more ARR for Rockwell, part of our strategy of growth for recurring revenue that Blake mentioned earlier. Data Mosaics, the applications we're building on data mosaics and all of our SaaS offerings are accessible through FactoryTalk Hub, essentially fthub.com. It's a one-stop shop for our SaaS applications across design, operate and maintain of the production system. You heard a bit earlier from Cyril and Matheus about some of the improvements that we've been making in our design offerings in FactoryTalk Hub, like FactoryTalk design studio or Optix Studio or Twin Studio. I'll highlight a few more that we're making across to operate and maintain. Rockwell was pleased to be recognized again by Gartner in the most recent MES Magic Quadrant and the Leaders Quadrant, kind of reinforcing the idea of industry leadership and manufacturing execution systems. Plex remains the only pure cloud SaaS solution operating at scale and industry today. And we've seen strong mid-teens ARR growth, including early wins in some new geographies where Plex has not previously been present around the world. Those are kind of beach headwinds and allow us to have a vehicle for further growth on a global basis. In Plex, we're adding industry-specific features, such as wayscale integration for the food and bev industry, or in the automotive industry, support for industry-specific quality standards. All of those features are yielding better productivity and more efficiency for our Plex customers. That growth in Plex for MES builds on a historical strength in MES, and MES in the form of pharma suite for life sciences. In '23, we added new functionality for our big pharma customers, helping them to scale fast in the face of the overwhelming demand that they're seeing for many of their new products. As we move from operations into maintain, we see that customers are focused on maintaining their production systems at peak productivity levels. We've enabled that with our fixed SaaS offering. And in '23, we added over 500 new fixed customers. That's tremendous growth, and it shows the ability of our high-velocity sales motion to scale up our annual recurring revenue. Increasingly, though, maintenance is not done on site with a wrench. It needs to be done in the remote fashion that we heard from some of the panelists on energy transition earlier. So we've been delivering solutions like FactoryTalk Remote Access and FactoryTalk Edge Manager, which provide that IT-like experience to manage devices and workloads at the edge. So software-enabled maintenance. I think it's an important productivity driver for our customers. It really brings IT workflows to the OT environment. I think you've seen, over these last few minutes here, the dramatic evolution and expansion of our portfolio, from data, from the edge to the industrial data hub to the cloud and applications taking advantage of that data. We're really helping our customers become more productive, resilient and sustainable. Thank you. Let me now welcome Matt Fordenwalt on the stage to talk a little bit about manufacturing life cycle management.

Thank you, Brian. As you've seen, our differentiated technology portfolio, a unique combination of cloud-native SaaS, on-premise intelligent devices, including AMRs. From the technology backbone, but it is the future of industrial operations. Through rich, contextualized data from the source to the edge, to the cloud, the opportunity now across all industries is how do we best standardize and simplify the workflows to define the outcomes, harnessing the power of this technology and the rich data creates. Manufacturing Life Cycle Management is really about simplifying the digital thread, creating operational resilience and productivity. However, the manufacturing Life Cycle crosses multiple different personas, from innovation, design, operate, maintain. The enterprise has historically been locked into its own organizational data silos, R&D, engineering, manufacturing, logistics. And the industry has made strides of bridging the gap between IT and OT technologies, but few have successfully addressed the convergence at the core of their business. Where real economic value is created, where we focus is on engineering and manufacturing, how do products come to life from conceptual idea to industrial production at scale. Rockwell's approach is that of a trusted adviser. Going along the journey of the entire Manufacturing Life Cycle combining our deep domain expertise from over 120 years of plant floor experience. And our consultative approach to meet our customers where they're at in their journey to standardize and simplify these workflows, which will unlock tremendous value, harnessing the power of that data that drives real productivity and resiliency into the organization. This structured approach, allows Rockwell Automation to engage a customer much earlier in his journey and much higher than the organization than ever before. Here's an example as every industry is going through these transformational changes. I have an example here from Life Sciences. Life Science companies face increasing complexity of their product, ever growing need to get to market faster and highly distributed value chains. This need for Manufacturing Life Cycle Management is only accelerating. We've created an integrated portfolio of technology and expertise that helps accelerate the digital journey, from early-stage development of new drugs, through full-scale manufacturing. This portfolio works across the value chain. Leaving an interconnected simplified digital thread that enables customers to unlock the data and information trapped across their organization. Speeding time to market, while maintaining the data integrity and delivering product quality. Early on in this journey up in preclinical research, our digital twin and simulation software, our recipe consulting capabilities, set the foundation for the simplified digital twin. Where we leverage all that data downstream accelerating into product development because we know that not all companies will start with a digital recipe to begin with. We're committing to meet our customers where they're at in their journey, we've developed a digital tech transfer solution that uses AI to convert existing paper recipes for easy to consume, easy consumption by downstream full-scale manufacturing systems. This digital tech transfer solution also disperses critical data across that distributed value chain, while safeguarding intellectual property. In full-scale manufacturing, our Automation and Manufacturing Execution Systems scale to meet their production needs. Doing that emulation early on, upstream allows us to scale much more rapidly across the vast manufacturing network. And combining and conceptualizing the data from early stage product development, allows us on a single data platform to provide that foundation to drive digital transformation scale across the enterprise. While all this is happening across the value chain, we also are augmenting the workforce, combining our remote technical support with AI, through a recurring contractual service. We're able to address steel and knowledge gaps, across the workforce, making work more efficient and workers more effective. This combination is powerful, as the workflows are standardized to connect the worker with the technology in a seamless stream of activity that simplifies how work is distributed across this broad value chain. At Rockwell Automation, we're partnered with Life Science companies to implement these digital technologies, that connect and integrate data across their manufacturer life cycle like never before to bring life-saving therapies to those who need the most. With this, I'd like to welcome Dean Kamen, Executive Director and Chairman of Army, to the stage.

Greetings.

Dean, I'd like to ask you a couple of questions. Why is Rockwell important to bringing life-saving treatments at scale to the market?

That's easy because they've demonstrated in just about every other industry, I know, aerospace, semiconductor, food processing. That what they bring to anybody is the ability to get to high volume, high quality, consistent, no surprise, output, they help people manufacture, about in the waning days of the Obama administration, I was, I guess, lucky enough to be called to the White House to discuss their frustration that the science seems to be screaming ahead every day, when you hear more exciting stuff. But why aren't we reducing the cost of health? Why well? Because science isn't going to create products, its going to create knowledge and solutions. So I pointed out to the President that I go to medical schools for 40 years, making stuff for them, Harvard, Stanford, Yes, you name it. You can go to every one of these places. And I told them, there's a petri dish foot vertical of life here. They know how to make neurons. They know how to make nephrons, they know how to make beta cells for pancreas, but those things aren't going to spontaneously turn themselves into high-volume, high-quality, FDA-approvable processes. Long and short of it, I'll skip over. I was asked finally to make a proposal to fix this problem by helping to essentially create an industry, and it wasn't going to be the people at the federal level that fund research. It was the United States Department of Defense that ended up giving us $80 million to form an organization to create this new industry. As soon as I knew we were going to get that money, I made 3 phone calls. I called 3 people, that are very different that I'll explain, and they had one thing in common. They've all been supporting my first robotics for a long time. They're all on the board of First Robotics. And I call Martine Rothblatt, who is the founder of United Therapeutics, the only company, I knew that was actually trying to make organs and has now succeeded. She's on our Board. I called, the founder and icon in the world of medical products, John Abele, the founder of Boston Scientific, who can help us figure out how to get industry together once. And I call Blake Moret, and I said, Blake, I know we've asked you to donate time and resource and share the vision of creating the pipeline of technology for the future through first, which is now a not-for-profit with 3,700 companies and 80,000 -- any it's working as bold as it seemed. I said I got another one for you, he more or less said, what's this going to cost me? And I said, no, this one -- you're going to create an -- we're not going to create a product. We're not even create a company. I have the opportunity to take $80 million and use it to bring together all the disparate skill sets from the world of engineering and manufacturing and they'll deliver to them all these great scientists in the medical world that know how to make small quantities of things in their lab. Yes, they'll get tenure. Some of them will win the Nobel prize in medicine. But none of them are ever going to make an industry out of making cells, tissues and organs at scale nor do they have the capacity to figure out to get it through the FDA, because the FDA doesn't even have a process. And this, The National Institute of Standard, that doesn't have a process for this. So I told each of the 3 of them, you're going to join as my founding Board members, it is not for profit and since it was the DoD that gave us the money, we're going to call this not-for-profit Army, advanced, regenerative but not regenerative medicine, regenerative manufacturing, regenerative manufacturing industry. We're going to bring together, the scientists and the engineers. We're going to create a baseline of precompetitive tools, that will allow this country within the next few years to start seeing the production at scale of cells, tissues and organs, which will have 2 effects. More than 90% of all the money spent in Health Care in the United States is on chronic care. I know that. I used to make all the new [indiscernible] the diabetes. I'm now making a new one that's solid state. I make 80% of the world's peritoneal dialysis equipment. Look, I feel very proud that we and the whole medical industry spend a lot of time creating chronic care solutions because without the chronic care, the things we're treating, people would die. On the other hand, I've never met a person that can't wait for the next dialysis treatment. It's so much fun. I never met a kid that would rather have an insulin pump and not have diabetes. If we continue to use our medical system to treat people with chronic conditions, 2 things are going to happen. We'll bankrupt, Medicare and Medicaid in the country. And we'll let people live longer and longer in an unhappy state. If on the other hand, we make it practical to manufacture cells, tissues and organs when we need to replace that organ. We'll give people a better quality of life, we'll lower the overall cost and will create a whole new industry. And if you think that automating semiconductors have to -- the science was shocked -- Bell Labs here on the East Coast. They won the Nobel Prize. They didn't create an industry. It took all sorts of people to build Silicon Valley, that whole infrastructure. It took a whole lot of companies to build 150 years ago in Detroit the automotive industry. It's going to take a whole lot of people to create this industry to make it practical to do this. And the cornerstone is going to be essentially Rockwell and the people that Rockwell is working with. We founded it like 6 years ago. Now it's a not-for-profit. It now has 200 members. Almost every major prestigious medical school is got a member -- is participating. And again, Rockwell is now helping us. And we are making cells. We are making tissues. We are building organs. And Rockwell, not just their hardware, but as you heard other people say a PLCs is a PLC. Rockwell has given us people that are now resident in our institution that Army. And after we got that $80 million and showed that we were organizing people like on our Board a couple of years into the 5 years, I told him we'll do this, about 3 years into it. I thought we were going too slow, after they looked at what we were doing, they said, we're going to give you another $50 million on top of that and give you another couple of years, because they saw the progress. Just at the beginning of this year, we got another $44 million to do development of the workforce for this up-and-coming industry in just a week or 2 ago, they announced that officially, the White House announced that what I've been calling ReGen Valley, the alternative to Silicon Valley. They've dubbed us ReGen Valley and said, we're going to give the opportunity to bring on another $70 million, basically to grow this industry. And they said ReGen Valley, the epicenter of a new industry, that will manufacture at scale, add quality, at reasonable cost, human organs will be in Manchester, New Hampshire, and its founding Board members, Blake is somewhere around here. I can't thank you enough for being the key that's bringing all this together. So thank you, Blake.

So thank you, Dean. How big can this market get?

How big can the market? I know everybody thinks this was a big industry. Most of you really weren't alive, were very young when the semiconductor became reality. And yes, they built Silicon Valley, and it was great. And I'm sorry, but like every other good technology, it has become and it's becoming more a commodity. There's a lot of big companies making this stuff now and they're starting to have to compete on cost. By analogy, the average processor that runs one of these puppies has got about 2 billion switches on it. And you can build 1 million of them we can sell them for a few hundred bucks. There are about 2 billion active cells in the pancreas. What if we could build an organ at scale the same way we think nothing of 2 billion transistors per die. What would you pay for a pancreas if you had a kid or a parent with diabetes? Most of baby boomers are going to start to lose their vision. They're going to start to see. Well, what if you could just make a little replacement retina? There'd be no more macular degeneration, no more blindness. And that's such a tiny organ. Could you make 10,000 of them at a time the way we do them on way for us? How big is the industry going to be? Well, this is about 2% or 3% of the GDP in the United States now, you guys make a lot of stuff to support it. Health Care is about 21% and is growing faster than anything. It's unsustainable. If we create an industry that changes us from chronic treatment, which will put me out of the current business is in which I'm looking forward to doing. If we can create an industry that can attack some of the issues by giving people replace their organs, when they need them, where they need them, how they need them. That industry in terms of quality of life, in terms of being able to, by the way, create fantastic jobs and make the U.S. an exporter unbelievable. If we can do that, I can assure your history is going to show that this will look like a blip, compared to what we're going to do with Army and advanced regenerative -- And by the way, every speaker up here was basically talking about how complex it is, and you've got lots of variables, you would say, oh, I can do energy management in 5 sec -- the variables to make a chip, even if it's a very complex 10, 15, 20 processes, packaging, do you know how many processes you go through to go from a single cell to a full organ? And we want that organ to have the same genetics as the patient that's going to get it. So they'll never need to wait 2 years on list of sadly 20% of the people die on waiting list now for kidneys, liver is 400,000 people on -- and when they do get an organ, they spend the rest of their life taking immunosuppressives, so that they don't reject the organ, but they're subject to everything else. If we can manage all the processes so you can actually make an individual organ with the specific genetics of the intended user in every case and keep track of all of that data in real time, it's a massively more sophisticated process than anybody's have ever used in manufacturing before, which is why we need Rockwell as a cornerstone who owns every project they're doing. But once you make a baseline of the capability to do that across all these things, you've created the precompetitive tools to create an industry so that all the different members. These guys will make kidneys, those guys will make livers, these guys will make lungs, but they'll all share the competitive now highly reliable systems, precompetitive systems to make this industry viable. And what I'm hoping is among our other key members, building out that system, validating that system, building the quality for that system is in almost every case tied in some way to Rockwall.

Dean, thank you. Appreciate it.

Thank you.

So as Dean mentioned, our work in life sciences and beyond to all the industries, that digital transformation, creating the workflows that allow the unscalable to scale as part of what we're trying to do with Life Cycle Manufacturing -- Life Cycle Management. At the cornerstone of that and what's key is cybersecurity. You can't -- if you have to secure everything in your building. And the industry has got millions of heterogeneous assets across thousands of plants and people are struggling to prioritize the risk and actions to create resiliency. Our cyber capabilities go well beyond Rockwell hardware and software, as our industrial OT cyber expertise and best-in-class IT partnerships, cyber partnerships, like Claroty, Dragos. Allow us to engage customers no matter what their control preference or installed base is. I would encourage everyone to visit our cybersecurity operations center demo on the show floor. And see firsthand how we blend our expertise and partnership together create unique value. Now with our acquisition of Verve, we're able in a single pane of glass to speak natively with OT assets and integrate commercial IT off-the-shelf security tools from our partners, into a single platform that provides real-time asset inventory, vulnerability management and risk remediation. This is a foundational element to mitigating cyber risk across industrial control systems by having this real-time context risk, context, risk, visibility into all the hardware and software in the network. At the center of the platform is an asset inventory system that collects all OT assets regardless of manufacturer, Verve's proprietary approach communicates directly with these assets, gathering critical information without impacting the network performance or interrupt production. They aggregates those sources, including Rockwell's technology partners, into this platform as a single pane of glass that provides that actionable insights to both OT and IT partners at our customers to quickly address the highest risk assets. Together, Rockwell and Verve, our latest acquisition, will enable customers to further build resiliency and continue to improve the security, safety and availability of their operations. Customers will benefit from this combination of best-in-class IT solutions, Rockwell Automation, domain expertise, on now Verve security operations center. Hopefully, as you can see, standardizing and simplifying the workflows, across the Manufacturing Life Cycle, unlocks tremendous value by delivering the outcomes that matter most to industries. Real productivity and resiliency. Thank you. I would like to welcome back to the stage, Blake Moret.

So we've spent some time talking about what it is that we do. And I hope that some of why we win, is becoming self-evident from the discussion. Let's go a little bit deeper into some of the areas that I'm particularly proud of and think that these are at the top of the list in terms of differentiators. So when we talk about, what internally contributes to that success and that differentiation, again, simplification has been a common theme. And it really fits very well with the idea of being a pure play. So having a single set of customers as the focus of the enterprise to have that ambient understanding of, who it is that, we're serving and their needs. It allows us to functionalize certain areas and not recreate them across multiple disparate businesses that really don't share common technologies or missions or what have you. It allows us to have a single sales force across the world, understanding those customers, organized to a high degree by the specific verticals, so that they can go deeper and be somewhat of experts in those areas. And to be able to more tightly integrate all of the pieces. We've done a lot and we've moved fast over the last few years. We've made acquisitions. We have a lot of new people. And a big part of the effort over the next couple of years is going to be to take these pieces, the great foundation that we have and weave it together even more seamlessly -- and that's from a commercial standpoint, that's from an internal organizational standpoint. And that's from a technology standpoint as well. If we look at how that shows up for the customer, it's really about unified technology and Logix with its multidisciplined control for a long time, has driven a lot of that value and quite frankly, margin as well because having a single platform to maintain is less expensive than having 4 or 5 disparate platforms for process, separate from discrete, separate from safety and so on. And so this brings some financial benefits as well and certainly ease of use. It's no coincidence that Hybrid is our single biggest vertical with 40% of our business because the wet end of the process, the front end of the process, the mixing and the batching and so on, looks a lot like process. And at the other end, it's packaging. And so it looks a lot more like a discrete operation, having one technology platform for a single set of maintenance people to be able to work on, throughout the enterprise brings very tangible benefits. And we talked about it for years and years, and it's still valid today, and it's important. It's also about standardizing functions across our customers' operations. And so as Sensia works on his digital platform to be able to do high-frequency use cases more repeatably and with standard code. We've done that for a long time with communications and configuring devices, but expanding that to the software side of things, and to be able to do that repeatedly with open APIs and so on, is something that's going to be important for customers, as well as well as a common look and feel. It's an open AI-enabled architecture, that we're describing here. And in each step of the way that we've talked about for the last little bit, production design, tools like Emulate3D stand-alone, FactoryTalk Design Studio, the first production control configuration tool that runs in a multi-tenant cloud, with all the benefits and the jumping board for additional innovation, control with Logix, which remains best-in-class. Logistics that Tessa talked about with independent car technology that continues to grow fast, that continues to disrupt the market and now with autonomous mobile robots, with the edge and cloud solutions that Brian Shepherd talked about, having that SaaS portfolio. That, again, because those technologies are all cloud native, it gives us some capabilities to more quickly integrate those pieces together because they come from roughly the same EPOC in terms of their development and their tech stack. And then with what we're building internally, in the way of FactoryTalk design studio that we talked about with Judson. The other piece beyond the technology, beyond the internal organization, is our culture. And we talk a lot about culture, and I think you recognize that particularly in the face of big disruptions like COVID and kind of supply chain shortages, we've seen, with a number of new people. Culture is the flywheel that sets an expectation for existing and new employees, as to how they're expected to behave. And as we grow and as we continue to add new people to the organization and we renew ourselves, again, that concept of a flywheel is all the more important. We talk about 4 principles of our culture. It's continuing to strengthen a culture of integrity, of diversity and inclusion. Those are things that we've always stood for and we continue to strengthen that. It's willing to compare ourselves against the very best choices, that our stakeholders have. And while we talk often about that in the context of customers as a stakeholder, it can be applied to employees. They all have choices to make, and they can make those and we want to be that choice. And because people are working so much more remotely now and so on, we don't have a captive audience in just Milwaukee or Cleveland. Our workforce is worldwide, and they can work for other companies. So we have to be a destination employer. Obviously, investors, you have a choice to make, and we're mindful of that as well. And so we try to take that cold eyed outside in view of all the choices that those stakeholders have. And that's an important part of the culture. It's not just incremental growth on improvement on what Rockwell is already doing. It's about increasing the speed of decision-making. And in many cases, that means driving that decision-making, capability and authorization further down in the organization. That also helps us further down in the organization moves to the top of the organization. They have experience with making decisions, and they haven't just become good at deferring the tough stuff. And then it's about a steady stream of new ideas, unlocking the voice of people who've been in the company a long time, but didn't think their voice mattered and about the new entrants to the organization and for us to truly listen. And it's important and it sets us apart. With that, we'll talk a little bit more about how we accelerate all of this, and I'd like to welcome Scott Genereux who's our Chief Revenue Officer, to the stage.

Good morning. Over the past several years, Rockwell and our sellers have delivered great results during a very challenging time. We've built strength in our consultative selling capabilities. We've strengthened our focus on industries and we've increased our intimacy with our customers through deep domain expertise. And we've extended our market access through our partner ecosystem and acquisition investments. We are positioned well to win, in the year ahead and leveraging investments made and strategies in place. Today, we're going to provide some additional insight into a few key areas. So I'm going to ask Barry Elliott and Gina Claxton to join me on stage. Barry is going to share with you some content around our approach in critical focus industries. And Gina is going to talk about the evolution of our partner ecosystem with a focus on the Americas. And then we'll take a little more time and look closely at key opportunities of how to win in EMEA and in Asia. With that, Barry? You're on.

I can have it now?

You got it now.

Thanks, Scott. Good morning, everyone. So I'm going to talk a little bit about some key focus industries, where we are seeing some extraordinary growth coming from investments -- Sorry, I don't know why I'm driving on the slides here. We're seeing extraordinary growth in some of these industries. So you've heard mention of a number of them earlier today. We spoke about energy transition in the earlier panel. And a lot of this growth is driven by significant underlying momentum. That's driven by megatrends, changing consumer demands, changing industrial demands. And that's attracting substantial private investment, a lot of that into greenfield and that's also being underpinned and also supported by either government initiatives or government incentives. A couple of examples that I'll cover on there, aspects like operational resiliency, workforce challenges, and we've spoken a lot about that earlier on the remarks today. It's not just the outgoing and aging workforce, but it's also the incoming workforce and what they are seeking from the job market that they're entering into. And then also cybersecurity themes that Matt touched on quite heavily. All of those are kind of across all industries. But when you think about significant greenfield investment, those challenges become substantially more acute to need to be solved. Aspects like climate change, net 0 commitments and sustainability are driving investments in electric vehicles, but they are also driving investments in energy transition. We heard a lot about that earlier today. And again, this is not just driven by macro aspects, like the need to address climate change, but also we heard about return on investments on these investments, being pretty significant. So it's not just about a macro factor. Semiconductor, predominant trend there is around shoring or reshoring, particularly as a primary resiliency play. And that's also being underpinned by a lot of government investment in that space. And then within Food and Beverage, which is our largest industry, we continue to see a lot of growth in that space around areas of changing consumer demand, changing packaging, testaments and some of that earlier. But also areas like protein processing, which have been traditionally very manual and a lot of automation being invested in spaces like that to do. So now if we touch on a little bit how Rockwell is solving the challenge that customers have in these industries and also finding new ways for us to win. Our industry segmented approach, that we've always had our deep domain expertise in these industries, the partner ecosystem that supports us and we, in turn, support into the industries. And then the strength and the market reputation of our core portfolio, is really what underpins our ability to find new ways to win and new ways to deliver additional value for our customers. And I'll just touch on a few topics over here. There are a lot of -- lot of areas to cover. But aspects around cloud native. You heard a lot about that today in order to be able to scale and do so, at speed, whether that's in the EV market or whether that is an energy transition or semiconductor or Life Sciences, as Dean was talking to earlier. That speed and scale requirement is only really achieved by software offerings that are cloud native. And so elements or offerings like we have with Plex, our ERP there, our MES, fixed maintenance management or areas where we are able to solve those challenges. As I already mentioned, there's a lot of greenfield investment taking place in these industries. So we're seeing extraordinary growth potential in there. So we're going to get a little more specific now and kind of look at the time line of a typical greenfield investment. The example we've chosen here is an EV battery investment. And what you would have seen, first takeaway you should note there, is that the time line is typically pretty long. So from project announcement to start of production. This was typically between 4 and 6 years. But you also heard earlier today, and that was stated on the panel that we're looking -- our customers are looking to shrink and compress that time. And so how are we helping them to enable to do that. The other part is there across that time line, there are a lot of technology decisions that are made over at various time frames across the overall time line. So if I look -- if you have on the slides next to me here, that's what we were able to offer just a few short years ago. So we've always been able to offer technologies and capabilities from project inception all the way through to managing life cycle. But today, we have a substantially broader portfolio through our innovations, our investments, both organically and inorganically that have enabled us to serve a much broader set of capabilities across that entire life cycle. And a few takeaways I want to leave you with over here is, one, we're able to engage much earlier in the project cycle. Through Kalypso and more recently with our acquisition of Knowledge Lens. And as a result of being able to engage earlier in that project life cycle, one, we're able to deliver value earlier. Number two, we're able to influence specification much earlier in the project cycle. And influence more specification because we now have expanded capabilities. And many of those -- most of those were covered by our presenters before and you'll see a lot of the names and logos, that you've seen in earlier presentations. So what that results in for us is that we have access to a significantly larger potential of project revenue. And as an ultimate outcome of that, in this example that I'm highlighting here today, is an EV battery greenfield, we're able to have access to 3x more revenue potential on an example like this versus an equivalent investment in internal combustion engine greenfield. In addition to that, there is 15% of that initial revenue opportunity for us that's available over the life of that project as annual recurring revenue. And then as a final point, our partner ecosystem, which I touched on a little bit before, continues to be critical for our success, whether that's the EPC customers that we serve, our system integrators, our machine builders, and I'm going to hand to Gina to talk a little bit more about that. Thank you.

Thank you, Barry. So I'll take a few minutes to expand on this once-in-a-generation opportunity that's entering the Western Hemisphere, but specifically North America is where we'll focus our time and why we're uniquely positioned to capture more of our fair share. We have talked about the drivers for this investment. Obviously, geopolitical situations, the diversification, derisking of the global supply chain and then, of course, infusion of government funds are all creating this moment in time. And it's affecting the industries that we call focused industries -- but it's also affecting all the kind of adjacent upstream and downstream industries as well that serve these industries. Harvesting natural resources such as lithium or water, for example. And so we're seeing really almost a universal opportunity across all industries. And for the last 2 years, we've been tracking this very closely. And we've actually tracked over 1,800 public announcements, that have been made, announcing new capacity and investment in this space, and that represents over $1 trillion of announced investments. So what do our customers need as they're making these unprecedented investments? Well, they need speed to value, increase this time to market. get that production online faster and derisk it in the process. They're also seeking to leapfrog their current capabilities in terms of digital innovation. We heard that from the panel today. And create what they're calling the factories or the operations of the future. And we truly believe we have advantages in actually serving these needs and helping them achieve these outcomes. So we've made targeted investments in how we're going to market to address this opportunity and capture more share. We've talked, of course, about the breadth of our offerings and portfolio and that's what we've spent most of the morning on. But really, it's about that scalable and flexible architecture so that when we show up to these large projects, we can solve multiple challenges along the entire life cycle of the project. For our customers, that simplified process, simplified experience, bringing more thought leadership and obviously, ultimately increasing that speed. And then, of course, North America being our home turf with being that market leader position that we hold right now, that incumbency is a huge advantage. Not just because of, obviously, the strength of the relationships, but that distribution network that we have out there in the territory with those local relationships, really that customer intimacy that already exists. We talk about no opportunity left behind because we're already so embedded. We've spent a lot of time and energy evolving that partner ecosystem so that we can show up to these projects as an entire ecosystem. We've invested in EPC partnerships with new programs and offerings that are more attractive to EPCs so that we can access these projects sooner. We have over 100 people supporting our machine builders and helping them go to these projects with a point of view that's integrated with the rest of our capabilities and, of course, our digital relationships and our systems integrators. All of this creates more speed and a simplified experience for our end users as we bring the pieces together and show up at our customers to deliver that value. And then the experts. The depth of our local talent and expertise is a huge competitive advantage for us. We have over 300, industry and technology domain experts that are focused on this area, helping our customers in the day-to-day solve these problems with agility and speed. So all of this value is very powerful except that we have to be able to show up together in a consistent way with a consistent experience. And so we have also expanded this singular kind of coordination function that allows us to drive these large projects with a singular process with an industry-specific voice program management, et cetera, because the execution is key to all of this, again, back to that speed and that time to value and that risk. An example would be a recent win that we had that was introduced to us by a large EPC, an EPC that we've worked with in the past, but we didn't have this level of relationship that we've now developed -- and so they introduced us into a greenfield opportunity. The customer selected Rockwell for the controls and automation foundation, place those orders. And then subsequently, a couple of months later, we've recently won the digital consulting work to kind of lay out that digital foundation, and they've recently just purchased our MES platform. So it's an example of revenue that we wouldn't have had before. If we hadn't made these investments in these types of partnerships, and now we're bringing all of Rockwell to the table to make sure that we're not just capitalizing on this moment of capital investment, but setting those seeds for the future. So we're looking forward to winning the controls and automation foundation in these projects that data architecture and then surrounding them with the ARR contracts, that will build that sustainable growth for the future. And with that, I'll turn it back to Scott.

Thank you, Gina. So I want to spend a couple of minutes on Europe, EMEA and Asia. So our business in EMEA has grown from about $1.3 billion to $1.9 billion, business over the last 4 years. In Europe, one of our primary initiatives in driving growth is through the machine builder market. Machine builders represent more than 30% of Rockwell's total business. And in Europe, it's even a larger percentage. So it's important to note also that the machine builders in Europe serve both the European market, but they also export across the globe for reach beyond the region. We drive growth with this audience through a focused industry approach. We will continue to focus on growing market share across our process and hybrid industries with our PlantPAx platform. Our largest market share in Europe is in packaging, which is attached to our ecosystem approach and once again, a traditionally strong segment of food and beverage. This is an area where independent cart is a differentiator in the market. We'll continue to double down on packaging while seeing growth and opportunities in market management and manufacturing, assembly and process. As you heard from Barry, our strength in key markets like Life Science, Food and Beverage, Oil and Gas, as well as our investments in Energy Transition, warehousing, materials management, position us advantageously to win. And in fiscal year '23, we did grow faster than the market in these focus industries, which demonstrates a strength in our strategy and approach. And as we've expanded our initiatives, energy transition and sustainable solutions, as we heard earlier, will continue to be high on customers' agendas. And the EU leads the way in ESG policies. We had large wins leveraging decarbonization solutions with Sensia, as you heard earlier today, and energy management and optimizational solutions, with our customers. We also drive growth by leveraging scale, access and expansion offers through our acquisitions. Our recent acquisitions of Cubic, ASEM, Avnet, they're expanding our market reach and regional footprint, across Europe. But all of our acquisitions, including Plex, Fiix, ClearPath, they expand our conversations with our customers and around incremental new solutions and capabilities. This includes adding value with our edge and cloud native software offerings, including FactoryTalk Optix, Plex, MES that you heard earlier from Brian. And while our EMEA market specifically in Germany, specifically, have strong competitive basis. But as you've heard between our machine builder focus, our strong portfolio, focus industries and acquisitions, we are very confident in our ability to break through and take share in EMEA. So let's pivot to Asia. Overall, Asia represents one of the largest opportunities and an opportunity to scale as a smart manufacturing leader. We see our offensive strategy as a continuation and an evolution of what we've been executing over the past several years, largely because we truly believe that our strategy is working. Over the past 3 years, we have grown this marketplace by 46%. So our strategy to do this is grounded in a differentiated approach that leads with a consultative solution mindset targeting key focus areas and industries. Our competitors have largely built models designed for mass market production sales through distribution -- and to be frank, this results in transactional type relationships. Our approach is to build customer intimacy while leveraging our channel for scale. We have the relationships and the deep industry expertise that allows us to directly advise on solutions to address our customers' biggest challenges. And then the partner to provide the technology and deliver and to achieve results. We support this in a proof of concept, execution, and then we scale quickly with technology delivered across the whole portfolio. So in Asia, we have a strong presence across all key markets. However, we do see two unique scale play markets that we're prioritizing our efforts around China and India. In China, we believe our differentiation can be demonstrated by our industry-focused solution, a consulted approach that I mentioned earlier. We have leading technology platforms that provide the backbone solutions needed to solve tough manufacturing challenges and unique differentiation for specific manufacturing use cases. Examples of this include the appetite that we've talked about and what we're seeing with independent car technology and has a flexible manufacturing enable for auto and continued strength in MES, pharma suite and life sciences. We also see great opportunities to accelerate the modular motor control center offering of Cubic in China, where they have a significant local manufacturing presence already in place. And in China, we must also be balanced. Many companies are rebalancing their Asia footprint right now. We have a smaller presence in China, and we do see an opportunity to grow our business by serving local and global customer needs. And we're continuing to invest to strengthen our local capabilities to serve the unique requirements of the Chinese market. So now let's switch real quickly over to India. In India, the competitive race is heating up. Manufacturing output is set to double in the next 10 years. So it's a big opportunity. And our portfolio of solutions and strategic industry focus is well matched for the country's demands. Our key industries in India include auto, tire, CPG, Life Sciences, chemical and oil and gas. And we're seeing EV emerge quickly in India, and we've been very successful in assembling infrastructure. We're also investing in India with a strategy to increase our local R&D presence. In fact, we have more than 4,000 employees in India today, which is double the number of employees we had just 4 years ago. And it's actually the largest employee population outside of the U.S. at Rockwell. So this includes a strong focus on software engineers, including those joining Rockwell from the Knowledge Lens acquisition. So with the complement of Knowledge lens and Calypso, we are expanding our digital consulting practice to achieve scale, which is what we need in this region. We've also increased our manufacturing footprint in India with the acquisition of CUBIC which has a facility in the country, and we're continuing to look at ways of expansion in this space as well. So in addition to China and India, we are seeing a strong growth trajectory across the region. In Korea, EV battery remains a highlight. But we're also expanding solutions in mining both upstream and downstream utilizing PlantPAx DCS and lithium recycling. This allows us to win across the value chain. So we have confidence in this market. We continue to see double-digit growth consistently across the entire region. And with continued focus on China and India strategies, Asia will be a strong accelerant in the year ahead. So as you can see from all the presentations, we believe in the focus industry strategies that you heard from Barry, the strong partner ecosystem and the onshoring opportunities presented by Gina and the consultative selling approach, our differentiated technology and our market access gains from acquisitions that will allow us to win in the year ahead and for the long term. So now I'd like to welcome our Chief Financial Officer, Nick Gangestad, to the stage.

Thank you, Scott, and good morning, everyone. I'm excited to have the opportunity here to share how this new strategic growth framework, what it's going to mean to us financially. And what is it going to do to our long-term financial framework. . So on the left is what you saw Blake share earlier this morning about our new growth framework and the way we're going to win in the market, on the right-hand side, I've added what is our -- what does this do to our long-term financial framework. And on first blush, I'd say it's not going to change a lot. We're going to continue to have earnings per share growing faster than our revenue growth. We're going to continue to expect free cash flow conversion to average approximately 100%. One point I would make out in light of this growth we are expecting core conversion at 35%. Previously, I've talked about that in the 30% to 35% range. We now see ourselves in the 35% expectation for core earnings conversion. In terms of this growth framework and what it means to our margin in the coming years. As I look at our long-term expectations for margin for each of our segments in the coming years, there are some things that we do in Rockwell that are going to drive margin improvement across the entire company. So -- and those are listed on the bottom there. Our pursuit of productivity across all parts of our company, supply chain improvement that we've been investing in the past and are going to continue to invest in as well as this accelerated top line growth, we see that as enhancing margin in all of our segments. Now if I go to each of our segments in first in intelligent devices, we're targeting a operating margin of 22% to 24%. And we're excited by the growth opportunities that we're seeing from autonomous production logistics that you heard Tessa talked about earlier this morning that taking what we've had in the past of a control system our independent car technology and mapping that up with Clearpath and what that can do to change the future of production, production automation and logistics on the factory floor. We're also investing in designing cost out of our products. We're going to working on cost optimization through redesign and innovation. Within software and control, we are targeting 31% to 34% operating margin. In fiscal year '23, our Logix portion of our business grew 30%, and that drove margins to record high levels in software and control. As we look to the future and as we grow volume and market share in control, we expect that to be a strong contributor to software and controls margin. We also expect to drive further synergies from some of our recent acquisitions within software and control. And then finally, the mix in software and control. As software becomes a bigger part of this segment, we expect that also to enhance margin in the coming years. And then finally, life cycle services. We target a margin in the coming years of 13% to 15%. And that margin expansion is going to come from several things. First, you heard Matt talk about our focus on high-growth recurring services that are margin accretive to that segment. We took actions in fiscal year '23 to streamline the organization. We think -- we expect that, that is going to expand margins in fiscal year '24 and beyond. And then our Sensia joint venture that profitable double-digit growth that we're -- that we expect out of Sensia, that will also be an important part of the margin expansion that we see in life cycle services. Beyond our organic growth driving profitability, we're also accelerating profitable growth inorganically. This is a version of a slide I shared a year ago. And at that time, I had in this title that we expect $150 million of EBITDA from companies we had acquired from fiscal year '16 to '23. We exceeded that number in fiscal year '23. And we're now targeting $200 million of EBITDA from these same companies in fiscal year '24. One of the bars below shows what we have historically shown of our inorganic priorities. But on the bottom, I'm now showing what Blake shared earlier of our new inorganic priorities, annual recurring revenue. And what we're investing there in software and services and our priority in that space to expand our annual recurring revenue. We continue to have market access in Europe and Asia as a priority inorganically, and then a new one, application-specific technology and focus industries. You've heard several times today as we talk about our increased focus on industry solutions. And we continue -- we will look -- we are looking from an inorganic perspective, how specific technologies to applications in particular industries can enhance what we're doing organically. Besides our -- what this is doing to our earnings, to our profit. In Rockwell, we believe we have developed a strong M&A muscle that goes beyond just generating earnings, but also generates accelerated growth for the company. When you take what we have -- what I'm showing here, and Blake shared earlier today that these added on average, 1.4% growth inorganically. But once they have become part of our company, they have averaged on an annual basis greater than 15% organic growth. Helping propel total organic growth within Rockwell. That's a historic performance marker that we've been exceeding. It's also an expectation that we expect to continue going forward with the transactions I'm showing on this slide. As we talked this morning about our new investment -- new horizon investments, Blake highlighted, what are the customer needs that are behind these components of growth? And what is Rockwell's differentiation? I want to take a moment to talk about what are some of the things Rockwell is going to be investing in the coming years around these different components of growth. First, from the faster secular growth, One of the areas I'll just point out is cybersecurity. It's becoming a part of many of our engagements with our customers. They have older devices that are -- that still aren't hardened. Verve, which Matt talked about earlier, allows earlier engagement with customers, we're also investing in motor control. This is something that is a key part of how energy is managed with our customers. We have some good technologies there. We're going to continue to invest in that capability. When it comes to growing share in expanded markets, you heard Tessa talk about autonomous production logistics. And as Tessa said, most of our customers typically rely on manual labor for moving the raw materials in those subassemblies to and from the production line. And it's a key need for our customers for increased efficiency and for safety. And that's one of the examples where we expect to be growing share in expanding markets in the coming years. Annual recurring revenue. We expect that to be adding 1 point of growth to total Rockwell growth each year. We're going to be investing -- continue to invest in our cloud native software offerings. As well as continued investments in our acquisitions like Fiix and Plex. And then finally, acquisitions. I've shared with you the 3 priorities of what we're investing in. We're looking at things that can complement what we are doing organically to increase the value and the comprehensiveness of our portfolio to drive even more value for our customers. That's over the long term. If I look just at the current year, fiscal year '24, what are we investing in, in '24? First of all, our total investment spend from fiscal year '23 to fiscal year '24 is going up 6%. 3% of that is coming from organic growth in our investments and then another 3% coming from our acquisitions of Clearpath and Verve to bring us to the total of 6%. On the organic side, what are we investing in? We're investing in research and development new product introductions that you've been hearing about throughout the morning. We're also investing in digital infrastructure to support this annual recurring business that is an important part of our growth strategy going forward. And as you heard Scott and Barry and Gina talked about just before me, we're investing in areas where we expect we can capture additional market share. So example, increasing our software and industry-focused sales force. And then as Gina talked about, we're expanding our North America teams supporting the pursuit of government-supported spending from acts like IRA and the CHIPS Act. Business resilience is important to us. It's important to our customers and it's an important area of focus to us in Rockwell of how do we make sure that our business model is resilient. And on the left-hand side is growth. What are we doing to make our business more resilient from a growth perspective. One example is annual recurring revenue. Annual recurring revenue, it's now greater than 8% of our revenue in fiscal '23. And we expect it to be greater than 9% of our total revenue in fiscal year '24. Part of that recurring revenue comes from our differentiated cybersecurity offerings. And then on the right-hand side, are things that we're doing to increase our resiliency from an operations perspective, things that we are doing to ensure that we can grow profitably in a variety of scenarios. We've been investing in our supply chain to make our supply chain more agile. We have a scalable workforce that can flex up and down depending on what are the production levels. In the last 1.5 years, we changed our pricing model to make ourselves more agile from a pricing perspective. And then our pay-for-performance philosophy and approach in Rockwell allows us to, in times of lower growth to scale down the amount of compensation. And in times when we are exceeding our expectations, of sharing that with our employees. All of these things are examples that we see as giving us more resilience in our operations. Our capital deployment framework. I'm showing it here, it is unchanged, but I want to keep it on the record of here's our -- what our priorities are around deploying capital and what we're expecting for capital deployment across different categories. And then in terms of capital structure, fiscal year '23 was a year where we've had a lot of focus on bringing down our debt. We put capital towards bringing down our debt. And we ended with our debt to EBITDA less than our target of 2.0. That gave us the flexibility and the agility to be -- without adding any long-term debt, funding our Clearpath and Verve acquisition early in fiscal year '24. And it's also part of our story of how we can bring down interest expense in fiscal year 2024 from what we had for interest expense in fiscal year '23. And then in terms of our -- in terms of our -- the last slide I'm going to share, in terms of our fiscal year '24 guidance, I'm just going to start by fiscal year '23 was a year in which we overperformed. We grew our top line 17%, we grew earnings per share by 28%, we grew annual recurring revenue by 16%. And as we look to fiscal year '24, as we're seeing normalization of orders as machine builders and distributors are clearing some of their extra inventory. That operational resilience that I talked about a couple of minutes ago, that's allowing us to forecast earnings per share growth even in a year of 1% organic growth at the midpoint of our growth guidance. So that's our view for '24. Thanks for your attention on this. And now I'm going to welcome Blake Moret back on the stage.

So I hope you found the last couple of hours interesting and exciting as we build on the strong secular tailwinds for automation with Rockwell's differentiation. We took a moment to pause in satisfaction of having delivered on commitments that we made Four years ago, it seems like much longer in the past than that. We have every intention and a commitment to accelerate that profitable growth and to continue to grow above market growth rates. And we firmly believe that nobody is better positioned through the combination of our offering through investment trends, through our culture, there's nobody in a better spot. I wouldn't trade places with anybody. And so with that, we're going to bring out my management team and spend some time answering your questions. Thank you.

So we, I think, have runners in the audience that are going to answer your questions since the lights are down. I'm not going to pick people with the hands up. I'll field the question and then relay the tough ones to my team. So that's how these will work..

All right. It's over here, it's Scott. Like the Clearpath deal was a little bit of a different move for you guys from the past. Robotics is not something that really ever looked at that I'm aware of. And there are no real fully scaled robotics players in the U.S.. Is there a bigger vision beyond Clearpath that you see for that business?

Let me make a couple of comments, and then I'm going to pass it to Tessa. Obviously, robots and programmable line control PLCs have existed side-by-side on the factory floor for a very long time. And so given our focus on production and everything that's around production, been knowledgeable about the different intersect points with robots for a long time. And a few years ago, we looked at -- so what is that strategy? What's the long-term endgame for where we're best positioned there? And with the fixed robots, so articulated arms, things like that, we focused really on simplification of the programming tools there. We don't think we necessarily need to own the arms there in certain industries like automotive, pretty crowded space. We've got some strong partners who are already there. And I'm not sure our efforts would be best spent trying to compete from a standing start against them, but being able to have common programs in some cases, like with Kamal to be able to have the Logix controller, not only controlling the in-feeds and the material handling and the line control, but controlling the robot itself. The robot libraries with that code package to be able to off the shelf. That seems like a pretty good path with the fixed robot arms as well as some investments we've made places like Ready Robotics, which abstract the specific robot provider and to be able to genericize the way that we interact with that individual third-party robot. AMRs are a little bit different. And when we talk about the mobile robots that Clearpath provides, specifically looking at in the factory floor space. So while those robots might venture into the warehouse, we're not looking to compete with some pretty well-established vendors in the warehouse space. So there's a lot to do on the production floor. We've got customers telling us and Tessa alluded to this in CPG and automotive, that being able to bring the material to and from the line when it's needed to be able to supply those operators or those assemblers on that line is their single biggest opportunity for additional efficiency. And so we have a lot of room to run by bringing this together with the line control. The idea of having that same programmable controller platform responsible for the motion and the safety of those AMRs as with the PLC is a huge opportunity and nobody has that today. Being able to bring that information up to Plex, so think of a module doing the fleet management in Plex along with the other scheduling and orchestration activities. Those are huge opportunities. We wouldn't have done this if it was just 1 AMR unit against unit, but it's the idea to bring this all together that is something really special.

Blake, 100% on everything that you said. And I think it is about -- it's less about a technology robotics. It's about the end use of moving material efficiently through a plant, driving cost and optimization for manufacturing in a lot of different industries. And so we've been really driven by how do we make this streamlined end-to-end well orchestrated an efficient production flow. And if you think about it, AMRs now, they're like the circulation system of a manufacturing plan. And so with that, you can see the movement through the production environment. You can understand better the bottlenecks that you're in that end-to-end process. And so I think we really driven how do we optimize that. We learned a lot with independent car and how fast that is growing and the efficiency that customers are gaining from that. And I think this was just a natural next step to extend that production logistics capability.

If I could switch gears a little bit. The 10-K came out last night, and it looks like your head count went up about 12% last year. Now I know most of that is India and Latin America, but still walking to kind of a flattish growth environment with higher headcount. How do you think about your head count going forward? And what do you really expect out I mean it seems like kind of a pretty big head count jump. So perhaps just a little color on why and what we can think about going forward?

Yes. So we've made some acquisitions over the year, over the last 12 months. And I will also say that some of the positioning for the coming year and the increased conversion on low top line growth is based on taking some cost out of the system, which does impact reduction in force across the organization. And we continue to maintain a focus on key projects, many of which that we talked about today. But we are continuing to look at head count and making sure that it's, one, the right amount and that we're managing the head count relative to our growth, but also making sure that, that head count is constantly being rebalanced focus on the highest level of return. So things that we've done in the past that may have slowed down in terms of fit with the strategy or contributing growth and performance. They can't hide behind a run rate. And we constantly look at that and we went through that pretty assertively in the fourth quarter with the restructuring charges we looked at, but not all of those people that are affected have left the organization at this.

Jairam Nathan from Daiwa. So I just wanted to dig a little deeper into auto and EVs and batteries. You talked about 40% of your auto coming from EVs and batteries. If I kind of compare and contrast the products that are touching this segment between ICE and EVs or segment or within the segments, are there differences on the products that you're supplying to the industry and the segment breakdown. How different is those between ICE and EV above metric?

Yes. I think the content, as Barry went through the slide, the content builds some of the things that we have long supply to the production of internal combustion engines. So you still have the basic stamping operations, the body and light operations, paint assembly, trim chassis, final test. I mean, all of these things you still have in an EV plant. But on top of that, you have the battery production and the front end of the battery production process is more process control. So it's Logix, but it's still -- it's in a different use because you don't have as much process control in other parts of the traditional automotive plant. You have independent car technology that while it has some applications in traditional drivetrain in battery assembly, independent card and specifically Rockwell's independent card has been seen as the absolute industry standard for that. So it adds to that and replaces some of the applications in traditional subtractive manufacturing, the boring of cylinders, the finishing of metal surfaces were primarily done by CNC, which we don't make. And so if you're a CNC provider, you're very concerned about the cannibalization of those processes, we didn't have that much to lose. We did that through partnerships with FANUC and people like that. And then I would say the other piece is the software, which contributes to that ongoing ARR opportunity while not specific to EV because those plants are newer, we didn't have EV plants 10, 15 years ago, people are looking at the MES, the scheduling function as I have to have rather than a nice-to-have type of thing. And we have a very good MES package for EV. And so I'd say it's addition to, and that's why we talked about the overall share of wallet as growing in these newer facilities. And that's not to even mention services piece that Matt talked about, the creation of digital twins, the use of Emulate3D, and we see a lot of the big brand owners using Emulate3D to simulate the throughput on these lines -- so some of it is just a function that there are newer plants that are being built. And so there's more of an opportunity to take care -- take advantage of recent technology. Anything to add?

Great. I just want to congratulate Scott on staying up late and reading the 10-K upsides price. Just on the big project, mega project list, what is your like content number on that? Is it -- these are big numbers, obviously, construction costs and things like that, but -- how should we think about that? And then how much do you think you've already seen out of that kind of $700 billion number, just so we can calibrate timing?

Yes. So I'm going to make a couple of comments, and I am going to give it to Scott as well. But neither of us are going to give you some percentage that you can turn the crank on to yield a revenue figure because it's more variable than that. These aren't just greenfields, right? These can be CapEx of existing facilities. And the percentage of automation content is going to vary significantly the facility. So when you talk about a $10 billion semi fab, that's going to look a lot different than an EV line than a life sciences API process. And the content in those are going to be different. So we've stayed away from saying multiply by x percent and then multiply by our share, and that's going to give you the incremental revenue over a period of time. We dimensioned that, and it's big and it's meaningful as we look at it, particularly because so much of that investment is going to be in the U.S., where we have the largest share, the best channel, the biggest installed base, the deepest relationships. So we're happy about that. It's going to be meaningful. We have already seen business that's resulted from that, but we're still in the early innings. There's still much more to come than we have seen, and it's a multiyear process. Scott?

Yes. I agree. It's still early. One of the things that I think we mentioned earlier, but we do have a dedicated team that literally wakes up every day and focuses in on this area, working with the greater team inside of North America. And there's a lot of activity going on in that space. We're growing pipeline. We're engaging with a lot of opportunities. But as Blake mentioned, I think it's still early to see, and we are getting some revenue, but not enough to talk about dramatically. But the opportunity that we're seeing is big. I mean, it's a great opportunity for us. And once again, depending on the industry and where we're at, some of these opportunities are in industries or companies that we already do business with, and some of them obviously are completely new opportunities that companies are building.

One of the other things, if I can add to that is some of this is based on the lead times of some of the equipment as well. So when you hear the discussions about switchgear, for instance, being ordered for some of these projects, still looking at -- the industry is still looking at 2-plus years lead time for some of that switch gear, the big transformers, things like that. We don't have anything with 2-year lead times. And so customers even though we may be a part of those projects, they have the ability to wait for some period of time before placing the actual order. So there's a bit of that dynamic we talk about supply chain issues being largely behind us at this point. That's not the case when you're talking about gear and other utility equipment there.

And then, Nick, just on the margin targets, when is the timing on that? Is that like a 3- kind of 5-year type of thing or just for the margins that you get?

Yes. I haven't put a specific year on it, but in the next few years, it's not like 10 years out, it's not next year, but it's in the next few years that we're expecting .

I want to put just a fine point on the margin thing because we get asked this sometimes is this framework going forward based solely on top line and the margin will do, what the margin will do -- that's not the case. We showed those to make sure that you understand that we are intent on expanding those margins. And while we've seen margins in different of those businesses at various points, touch those levels, we don't plan for that to be a passive activity. We plan to continue to take the actions to drive those margins along with that top line growth.

Julian here from Barclays. Maybe just on the margin point, I'm trying to drill into that a little bit. Software and control, that might be the case that margins should expand a lot more as there's a lot more momentum now behind the software portion of the business. And there might have been a case for a more aggressive margin goal in that context, just given where the software and control margins already sat the last 12 months. And then within Life cycle services, any sense of how much of that doubling of the margin is tied to Sensia versus the base business?

Yes, I'll take both of those, Julian. So on the first part -- well, I'll take the second part first. In terms of life cycle services and the expansion of the margin there, moving to the 13%, 15% range. Sensia is probably 1 or 2 points of that over the course of several years. Not -- it's not all of it or even half of it, but it's 1 to 2 points of that total. In terms of software and control, I just also point out the pretty amazing progression we had on software and controls margin in fiscal year 2023. We -- in '22, Software & Controls margin was approximately 28%. With that strong growth we had in fiscal year '23, in particular, the 30% growth in our Logix business that helped move that whole segment's margin up to about 33%. Now we're targeting 31% to 34% for software and control. We're expecting that in fiscal year '24, that will be a reduction from -- we expect that margin to come down from where it was in fiscal year '23 based on the growth expectations of the different components we have within software and control. The last piece I'd add to this and thinking about these longer-term margin expectations, in particular, software control. That is also the segment that attracts a significant portion of our incremental growth investments. And as we're looking at different places we're investing, that margin long-term target we shared also gives us that room and expectation for incremental investments in that segment.

Just a quick follow-up on the growth profile of services. I think pure services is maybe 10% or so of the company now. Do you expect that portion to outgrow the balance of the company in the coming years? And just wondered sort of as we think about the ratio or tie-in of ARR to services, kind of help us understand from the outside the relationship. .

Sure. So this is -- obviously, it's an equation that balances things. And I don't think that we're going to see outgrowth of life cycle services beyond what we see from the company average. We had certain parts of life cycle services that are stars, right? We talk about cybersecurity. We talk about some of our digital services that are profitable growing fast. But we've got stars in all of the segments, and that was part of the idea behind it is that we would have 3 segments each contributing good value both to customers as well as financially. From time to time over the years, even going back to the CP&S days, we've modeled out. So what if the worst thing happened and services ran away with that lower margin profile. And I don't think in any situation, we should be looking at that because we would manage it, quite frankly, right? I mean the commitments we have to profitable growth and those margins and margin expansion the company overall is something that we have under our control as we go forward there. We recognize that a big part of our strong valuation is based on our intellectual property. And it is the products and it's the software while having that services capability helps knit it together in the way that Matt described well a few minutes ago, it's a combination of all these things that makes us special.

Yes. The only thing I would add from the ARR portion is our contractual services aspect will grow in line with company expectations. I think that was one aspect of your question, I just want to make sure you have it.

Yes, it's going to be a mix. ARR is a mix of software and often related services there. And we're going to continue to manage that mix. So that ARR in addition to giving us consistent base to grow from that it contributes positively to the margin and profitability profile as well. We're not going to fill up ARR with hollow calories, if that's the concern.

It's Andy from Citi. Nick, I think you had talked about 1% pricing for '24, if I remember correctly. And Blake talked about sort of dynamic pricing and sort of improving that model. You're selling a lot more on high technology applications as we talked about today. But let's say, versus 5 years ago, how good is Rock's pricing muscle now? And how much more room is there to improve it?

I would say the pricing model in our agility is strong right now in terms of our ability to we react if needed, if we need to be adjusting price either up when we're facing cost pressures or to adjust price to address competitive pressure. So the ability that we have with our technology that we've invested in the last few years to be seen what's happening with price and to optimize where our pricing is. I'll call that the strong. The 1%, I think I actually said last week, a little over 1% price in fiscal year '24. That's largely coming from some of the price increases we've put in, in the past also as we work through our backlog. And it's against the backdrop in which we expect virtually no inflation in our input costs. We -- so that's the dynamics we have in what I'd say I feel we're in a strong position right now.

If I just add, I think we're more -- that muscle is more lumber. Some of the things that we were taught during COVID and then the early days of the supply chain shortages to be able to get price into the system and to realize it quicker, things like the fixed discount that we put place allows us to realize price much quicker. And as Nick said, more surgically with the better telemetry that we're getting from what's happening out in the field.

And then, Blake, just a quick follow-up. Like how would you think about Rockwell in a bigger slowdown, like in the past, Rockwell has been more cyclical, but now you've created a much more diverse dynamic company. So I noticed you talked about 5% to 8% through the cycle growth, but how is the company positioned if we were to slow down more than you think?

Yes, 6% to 9% with the impact of inorganic. And so I think we've got an early view with the pandemic. And in terms of our financials, we fared much better in each one of these things is different. But the revenue decline and attendant impact on profitability showed bared evidence that our resilience efforts are helping. And I think the things that Nick talked about with respect to our resilience an increasing ARR. The management of our worldwide footprint. And I should add that a lot of work from Bob's team, we increased that capacity to get to that $10 billion-ish level without adding big new rooftops. And so that's a measure of efficiency resilience because we're not a capital-heavy organization increased exposure across the vertical industries, process 35%. A lot of things that we're talking about that are in that long tail of 5-ish% of our business that we never talked about in the past. And I think that, that helps hedge against the traditional industries that Rockwell was known for 20 years ago. So I think we're in a lot better spot, but the work continues on that both commercially and internally as well so that we can react to shocks to the system, but also have a base that dampens the downside of these economic cycles. I think we have time for one more question. Maybe not.

Joe O'Dea, Wells Fargo. I just wanted to ask, when you think about the most recent quarter and you've got revenue up solid double digits and orders are going down double digits. It kind of leads along to the imagination. And so what done over the course of the last several months to get out there and really keep the tires on what's going on in underlying demand trends, if you can talk about what you're hearing from distributors? What are you hearing from end users? What you're hearing for machine builders to build confidence around your view of what's actually happening there in end markets?

Sure. So we went out, and this was a lot of work from Scott's team, but throughout the organization, also within Bob's supply chain organization to look at the very good detail we have of distributor inventory as well. But first, on Scott's team, went out and we looked at our top weather making customers, so those users out there, dozens and dozens of users that are our biggest customers and talk to them individually about their CapEx and OpEx expectations of the coming year. We did that with machine builders as well. Looking at those big machine builders with that repeat business what are they expecting in terms of the impact on Rockwell as they clear their inventory, what's their incoming book of business looking like? And the uniform picture was that their demand that they saw over the coming year was still positive and still -- and stronger, I would say, than the midpoint of our guidance but it's dampened to us by the distributor inventories, and we understand quite well distributor to distributor, how much more inventory do they have on the shelf than they would normally have. Now we do expect that, that inventory will reset to a level that it was -- that is higher than it was a couple of years ago. And as we talked about, we expect that equilibrium to occur in Q2, following the return of all of our products to prepandemic lead times. And so that's what went into the equation that gave us the confidence to say that we have hit the trough in orders and that we expect them to begin to go up in Q1, but then with a more pronounced ramp in Q2. It was based on that feedback directly from customers, including users and machine builders an analysis of our distributor inventory, getting distributor feedback on what their growth expectations are for the Rockwell portion of their offering over the coming year. So with that, I want to thank you all, and I think Aijana has got some comments for us.

No, thank you, everyone. This concludes our prepared remarks and Q&A. We will break for lunch, which is in the back, and then we'll resume at 1:30 for show floor tour.